Correlation Between Smead Value and Global Small
Can any of the company-specific risk be diversified away by investing in both Smead Value and Global Small at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Smead Value and Global Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smead Value Fund and Global Small Cap, you can compare the effects of market volatilities on Smead Value and Global Small and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Smead Value with a short position of Global Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smead Value and Global Small.
Diversification Opportunities for Smead Value and Global Small
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Smead and Global is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Smead Value Fund and Global Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Small Cap and Smead Value is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Smead Value Fund are associated (or correlated) with Global Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Small Cap has no effect on the direction of Smead Value i.e., Smead Value and Global Small go up and down completely randomly.
Pair Corralation between Smead Value and Global Small
Assuming the 90 days horizon Smead Value is expected to generate 1.09 times less return on investment than Global Small. But when comparing it to its historical volatility, Smead Value Fund is 1.07 times less risky than Global Small. It trades about 0.06 of its potential returns per unit of risk. Global Small Cap is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,545 in Global Small Cap on September 12, 2024 and sell it today you would earn a total of 491.00 from holding Global Small Cap or generate 31.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Smead Value Fund vs. Global Small Cap
Performance |
| Timeline |
| Smead Value Fund |
| Global Small Cap |
Smead Value and Global Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smead Value and Global Small
The main advantage of trading using opposite Smead Value and Global Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smead Value position performs unexpectedly, Global Small can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Global Small will offset losses from the drop in Global Small's long position.| Smead Value vs. Vanguard Value Index | Smead Value vs. Dodge Cox Stock | Smead Value vs. American Mutual Fund | Smead Value vs. American Funds American |
| Global Small vs. Third Avenue Real | Global Small vs. Third Avenue Small Cap | Global Small vs. Smead Value Fund | Global Small vs. Baron Focused Growth |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Valuation module to check real value of public entities based on technical and fundamental data.
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